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Home Latest property industry research and insights
January 22, 2026

December 2025 quarter ASX A-REIT market update

Stuart Cartledge, Managing Director, Phoenix Portfolios

 

Market Commentary

The S&P/ASX 300 A-REIT Accumulation Index lost 1.2% over the December quarter, marginally underperforming the broader equity market, with the S&P ASX 300 Index off 0.9%.

With property transaction markets open once more, property fund managers were strong performers in the period. Centuria Capital Group (CNI) was busy expanding its agricultural real estate business. Firstly, its unlisted Centuria Agricultural Fund (CAF) secured the purchase of Australia’s largest hydroponic greenhouse for $168 million. It then acquired agricultural property business Arrow Funds Management adding a further $444 million of agricultural funds to its platform. It finished the quarter up 31.2%. HMC Capital Limited (HMC) showed some signs of stabilisation amongst what has been a challenging year, gaining 24.5% over the quarter, but remaining down 58.6% for the full year. Charter Hall Group (CHC) also showed good momentum, upgrading operating earnings per security (OEPS) guidance by 5.5%, supported by heightened investment activity within its property investment and funds management platform. CHC finished the period 8.6% higher. Somewhat bucking the trend was Goodman Group (GMG) which disappointed some market participants by not upgrading its own earnings guidance and providing no details on new funds management products at its quarterly update. This was somewhat rectified in December, with the announcement of a $14 billion data centre partnership with CPP Investments. GMG closed the quarter down 5.0%.

Retail property owners performed well in the period. Ongoing solid rent growth, supporting by an increasing population and limited new supply is restoring the negotiating power of shopping centre owners. Regional mall owner Scentre Group (SCG) gained ground, adding 2.9%, whilst competitor Vicinity Centres (VCX) rose 1.6%. SCG-managed Carindale Property Trust (CDP) gained 5.6%, as the Lendlease Group (LLC) fund that owns a stake in the Westfield Carindale Shopping Centre appears to be on a trajectory to wind up. Owners of smaller neighbourhood shopping centres also outperformed, with Region Group (RGN) up 1.2% and Charter Hall Retail REIT (CQR) eking out a 0.1% gain.

Office property owners displayed some weakness in the quarter as bifurcation in the rent growth and values of office properties across jurisdictions and class appears to be widening. The cores of the Sydney and Brisbane CBDs appear to be recovering, with investor interest in those areas reemerging. Suburban and secondary locations are finding it more difficult to attract robust bidding and are seeing persistent elevated incentives. Smaller office property owners Centuria Office REIT (COF) and GDI Property Group (GDI) underperformed the market, losing 2.1% and 2.9% respectively. Mirvac Group (MGR) was a laggard, dropping 7.6%, while large cap competitor, Dexus (DXS) only gave up 0.8%.

Long weighted average lease expiry (WALE) property owners were amongst the weakest in the period. This property is particularly sensitive to longer term interest rates. With the Australian 10 Year Government Bond yield increasing from approximately 4.3% to 4.8% over the quarter, it is unsurprising that this property underperformed. Childcare property owners were weakest, facing higher interest rates and negative sentiment towards the sector. Charter Hall Social Infrastructure REIT (CQE) gave up 7.9%, while Arena REIT (ARF) lost 7.0%. It is worth noting that direct market transactions for this type of property appear to remain robust. Owners of petrol station properties fared somewhat better, but still underperformed, with Waypoint REIT (WPR) and Dexus Convenience Retail REIT (DXC) off 4.0% and 4.3% respectively.

Australia’s residential housing market is at an interesting juncture, with chronic undersupply running into ever increasing affordability concerns. Across the period, it appears as if house price momentum has stalled in Sydney and Melbourne, however, continues to march on in Brisbane, Perth and Adelaide. After producing solid returns earlier in the year, residential property developers lost some ground in the period. Peet Limited (PPC) announced the conclusion of its strategic review, with more of an “evolution” than a “revolution” in strategy. It was down 1.0% over the period. Perth-focused Finbar Group Limited (FRI) gave up 4.0%, however has restocked its project pipeline for the coming years. Large cap developer, Stockland (SGP) dropped 4.9%, easing after strong performance earlier in the year.

Market outlook

The listed property provides investors with the opportunity to gain exposure to high quality, institutionally managed, commercial real estate, with projections of solid prospective growth. While share market volatility may be uncomfortable at times, the offset is liquidity, enabling investors to rebalance portfolios without the risk of being trapped in illiquid vehicles.

Property, both listed and unlisted, is a particularly interest rate sensitive sector. In recent years interest rates rose off generational lows, providing a headwind for real estate returns and valuations. The Reserve Bank of Australia has now reduced its Cash Rate Target three times since February 2025, providing a more supportive environment for real estate securities. The August reporting season reflected this, with companies under coverage providing solid updates, valuation growth and an expectation of liquidity returning to the property transaction market. Long term valuations are driven by “normalised” interest costs, meaning the impact of short term hedges maturing is mostly immaterial.

The industrial sub-sector continues to show strong absorption of relatively high levels of supply, aided by the tailwinds of e-commerce growth, the potential onshoring of key manufacturing categories and the decision by many corporates to build some redundancy into supply chains to cope with current disruptions. All of these factors are contributing to ongoing demand for industrial space, albeit the previous period of market rents expanding rapidly appears to have dissipated. Vacancy rates remain near historic lows of around 3% in many markets. While rental growth has recently cooled, construction costs remain elevated, making additions to supply difficult and thereby prolonging conditions.

We remain cognisant of the structural changes occurring in the retail sector with the growing penetration of online sales and the greater importance of experiential offering inside malls. Recent performance of shopping centre owners has however been strong, with consumers showing resilience and share prices moving higher, with some trading at meaningful premiums to net tangible asset backing. Importantly, we are also now seeing positive re-leasing spreads in shopping centres, indicating strengthening demand from retail tenants. These outcomes are no doubt aided by minimal vacancy across retail portfolios.

The jury is still out on exactly how tenants will use office space moving forward, but demand for good quality, well located space remains solid and there is growing momentum from companies to get staff back into the office. Leasing activity is beginning to pick up, and transactional activity is also returning, with discounts to book values materially reduced. Incentives on new leases remain elevated. At this stage demand for office space appears to be highly variable depending on location, even within submarkets.

We expect to see limited further downside to asset values in office markets but elsewhere expect market rent growth to drive valuations higher as capitalisation rates appear to have stabilised. Listed securities provides exposure to such growth.

The content above is taken from the Cromwell Phoenix Property Securities Fund quarterly report. Sign up here to be the first to access the latest report and to gain a deeper insight into the Fund’s performance.

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Home Latest property industry research and insights
January 22, 2026

December 2025 direct property market update

Economy

As was often the case over 2025, geopolitics continue to cloud the economic outlook, with the U.S. military operation in Venezuela on 3 January the latest example. Financial markets have largely been unaffected to date, reflecting Venezuela accounting for less than 1 per cent of global oil production (despite holding the world’s largest reserves)1. However, the longer-term implications remain unclear, and subsequent comments regarding the future of Greenland’s sovereignty have added to uncertainty. While the direct implications for Australian real estate are limited, second-round effects could emerge through lower global growth, heightened market volatility, exchange rate movements, and any resulting shift in the inflation outlook – particularly if the U.S. dollar’s safe haven status were to diminish.

On the inflation front, CPI continued to print higher than expected over the final months of 2025. This data saw cash rate expectations shift, with the market pricing 45bps of hikes in 2026 as at 2 January2. The most recent CPI data, released 7 January, showed the pace of annual inflation slowing from 3.8% (October) to 3.4% (November)3, an outcome which was below market expectations (3.6%). While the moderation was welcome and slightly tempered both market expectations for rate hikes and long-term bond yields, it was largely driven by volatile categories such as electricity and holiday travel. Underlying price pressures remain, and the RBA will likely want to see several periods of downwards trend before considering the prospect of rate cuts.

 

 

Beyond inflation, cooling house prices and auction clearance rates may provide some confidence that current monetary policy settings are restrictive, but it is the labour market which will carry the greatest weight in the RBA’s deliberations. The unemployment rate has been steady at around 4.3% for the past six months4, but job vacancies, underemployment, and hours worked indicators do suggest conditions are slowly becoming less tight. Both the Labour Force (22 January) and CPI (28 January) data releases will be critical in guiding whether the RBA is likely to remain on hold or hike at its next meeting in early February – economists are currently split, with two of the major banks expecting no change and two expecting a 25bps increase to the cash rate.

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Office5

Net demand was positive for the eighth consecutive quarter, with occupied space increasing by nearly 44,000 square metres across the major CBD markets in the final three months of 2025. Sydney CBD recorded the strongest increase in net demand for the third consecutive quarter on a square metre basis. Australia’s largest office market benefitted from strong A-grade net absorption, with large financial and professional services occupiers leasing space across several buildings in the Midtown precinct. On a percentage basis, Adelaide CBD was the top-performing market with occupied stock increasing by 1.0%, also driven by large occupiers. Canberra was the only major market to record a contraction of occupied stock over the quarter, due to the consolidation of a federal government department’s office footprint. The rankings and performance of the major CBD markets in the final quarter were consistent with the results recorded on an annual basis over 2025.

The national CBD vacancy rate was unchanged over the quarter as new supply completions offset higher net demand. Adelaide CBD vacancy decreased from 15.7% to 14.9% reflecting the strong leasing performance over the quarter and an unchanged total stock level. Brisbane CBD saw the biggest increase in vacancy rate (+1.0%), as a partially vacant new Premium building reached completion. While Brisbane CBD vacancy has increased over the last two quarters, it has not been due to shrinking demand but rather the biggest calendar year of supply since 2012. Positively, no supply is expected to be added to the Brisbane CBD market in 2026, which in our opinion will put downwards pressure on vacancy and be supportive of rental growth.

 

National CBD prime net face rent growth accelerated to +1.5% for the quarter and +6.3% for the calendar year, the strongest pace of annual growth in eight years. Brisbane CBD led the way with quarterly growth of +2.6%, duly supported by Canberra and Sydney CBD. On an annual basis, the pace of growth accelerated in every major market except the Perth and Adelaide CBDs. Prime incentives were largely unchanged over the quarter, Brisbane CBD the exception with a decrease of 80bps. This improvement drove a strong outcome in Australia’s top-performing office market, with Brisbane CBD annual prime net effective rent growth hitting double digits for the 10th consecutive quarter. Prime rent growth continues to outperform rent growth across lower quality assets.

National office transaction volume exceeded $4 billion over the final three months of 2025, representing the strongest quarter of dealmaking since interest rate hikes put the brakes on real estate liquidity in 2022. Activity was headlined by Commonwealth Superannuation Corporation taking full control of Grosvenor Place (Sydney CBD), and GPT’s subsequent acquisition of 50% of the asset. Brisbane and Canberra also recorded transaction volume greater than the 10-year average, with Brisbane’s figures driven by a recovery in the number of deals. Average prime yields were unchanged in every major market except Melbourne CBD, which saw a small expansion over the quarter.

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Retail5

Improving household wealth and income have continued to flow through to consumption despite consumer sentiment remaining in pessimistic territory. Household Spending Indicator data for October, the most current at time of writing, showed the strongest monthly growth in spending since early 2024 and the strongest annual growth since late 2023. The Clothing and footwear category was the top performer over the month, a positive for Regional shopping centres which have a higher weighting to discretionary consumption. Non-discretionary consumption delivered stronger growth on an annual basis, with spending in the grocery sub-category increasing +7.0% year-on-year6.

A positive demand environment combined with limited new supply led to improvement in retail vacancy rates. Neighbourhoods was the only centre type to record an increase in stock level over the quarter, as four new developments reached completion. Regionals vacancy declined to its lowest level in over ten years, with conditions improving the most along the East Coast. Neighbourhoods vacancy declined to its lowest level in nine years, led by South-East Queensland and Perth. It was a mixed bag for Sub-Regionals, with the vacancy rate over the last six months increasing in Melbourne by 120bps but decreasing in Perth by 190bps.

Net rents were relatively unchanged over the quarter. Sydney and Melbourne Regionals both recorded rising rents for the second consecutive quarter, albeit muted growth of just +0.2%. South-East Queensland remains the top-performing Regional shopping centre market on an annual basis despite being flat over the last three months. It was a similar story in Neighbourhoods, with Sydney recording quarterly growth of +0.2% and Melbourne net rents increasing by +0.3%. No markets recorded net rent growth for Sub-Regional centres.

Retail transaction volume strengthened over the quarter, totalling over $3.5 billion. Regional shopping centres dominated activity, comprising the three largest deals and nearly $1.9 billion of volume. Like last quarter, the largest deal was a 25% stake in the country’s second-largest shopping centre, Westfield Chermside in Brisbane. It was an active quarter for Sub-Regional and Large Format centres as well, with both centre types exceeding their average quarterly volume of the past five and ten years.

There were signs of retail yield compression across the quarter, consistent with stronger deal volume and investor interest. Regional average equivalent yields compressed by 12-13bps in Perth, Adelaide, and Melbourne. For Sub-Regionals, only the lowest (Sydney) and highest (Perth) yield markets were unchanged, with South-East Queensland, Adelaide, and Melbourne all recording compression of 12-19bps. It was a similar story in Neighbourhood centres with South-East Queensland, Melbourne, and Perth yields compressing 7-13bps.

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Industrial5

Occupier take-up (gross demand) softened compared to last quarter but remained well above the pre-COVID average. Retail & Wholesale Trade recorded the biggest decrease on a percentage basis, largely due to a slowdown in leasing activity from wholesalers. Manufacturing demand was resilient, exceeding 150,000 square metres, while smaller occupier industries such as Construction, Utilities, and Public Administration continued to record elevated demand relative to trend. From a geographical perspective, Melbourne recorded the most gross take-up at nearly 290,000 square metres. However, it was Perth that was the top-performer, recording its strongest quarter of demand since mid-2015. Perth’s strong outcome was driven by pre-leasing activity at new developments.

While demand is moderating, so too is supply. Just over 540,000 square metres of stock was added to the market in the final quarter, 11% less than the quarterly average over the last five years. Completions for 2025 totalled 2.3 million square metres, the lowest level of supply in a calendar year since 2021. There is currently 2.2 million square metres of supply under construction and due for completion in 2026, with a further 1 million square metres having plans approved or submitted and also scheduled for completion this year. A consistent trend over 2025 was the delay or postponement of projects due to construction and feasibility constraints, and this dynamic looks set to continue.

Prime net rent growth improved slightly on last quarter, averaging +1.0% nationally. Adelaide was the top-performing market as the majority of its precincts recorded rent growth of approximately +3.0% for the quarter. Rent growth was solid in Brisbane but largely flat across Sydney, Melbourne and Perth. Across the East Coast, market rent growth continues to normalise as vacancy rates move back towards long-term averages. Average prime incentives decreased by 250bps in every Perth precinct and were largely unchanged across the other markets, supporting effective rents.

Industrial transaction volume was weak in the final quarter of 2025, driven by a lack of large portfolio deals and limited transaction activity in the two largest markets (Sydney and Melbourne). For the first time in five years, Brisbane was the highest volume market in dollar terms, underpinned by the Southern precinct.

Average prime yields compressed by 12bps across most precincts in Sydney, which maintained its position as Australia’s tightest market. Most Adelaide precincts also recorded compression, ranging from 13-25bps. At the other end of the spectrum, Melbourne yields expanded by 25bps in each of its three major precincts. Anecdotally, confidence and pricing have been impacted by an uncertain policy environment.

Outlook

While the S&P500 has risen to record highs, trade policy uncertainty remains a headwind for stronger investor confidence. The Supreme Court is set to rule imminently on the legality of Trump imposing tariffs using IEEPA powers. Jobs growth and company earnings could benefit from the removal of the tariffs. However, the administration has indicated that other legislative instruments (such as the 1962 Trade Act) will be used to maintain the status quo if the current arrangement is struck down. Geopolitics more broadly will be closely watched, as the implications of the Venezuela operation become clearer. Trump also appears to be laying the groundwork for Greenland negotiations, which could result in the US gaining greater access to the territory’s natural resources (e.g. rare earth minerals). Meanwhile, protests have intensified in Iran, adding another layer of geopolitical risk for markets.

While Australia is not immune from global ructions, it is relatively insulated. The RBA has delivered a “soft landing” to date, but inflation remains elevated and needs to be addressed before expectations become unanchored from the 2-3% target range. This can be achieved with tweaks to monetary policy – rather than wholesale changes – as economic data evolves.

The commercial property market continues to stabilise, with improving sentiment evident in both capital flows and leasing fundamentals. Construction remains prohibitively expensive in most circumstances, crimping development pipelines and supporting the valuation and rent growth outlook for existing assets. Office appears to have reached an inflection point, with valuations improving and institutional and offshore capital becoming more acquisitive, particularly for prime assets. A similar, more progressed story is playing out in retail, as shopping centres at either end of the leisure-convenience spectrum record tightening yields. We see industrial performance becoming more precinct-specific, as greater variance in space market fundamentals emerges across markets and asset types.

 

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Footnotes

  1. Venezuela to continue supplying oil to US ‘indefinitely’, White House says, The Guardian (8 January 2026)

  2. ASX (Jan-26)

  3. CPI Nov-25, ABS (Jan-26)

  4. Labour Force Nov-25, ABS (Dec-25)

  5. Cromwell analysis of JLL data (Dec-25)

  6. Monthly Household Spending Indicator Oct-25, ABS (Dec-25)

 

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Home Latest property industry research and insights
November 27, 2025

Tracking the office recovery – five charts that tell the story

Colin Mackay, Research & Investment Strategy Manager, Cromwell Property Group

After a 19-year premiership drought, the Broncos have returned to the top of the rugby league totem pole. Another redemption story, not as long in the making, is underway in commercial real estate. Office was out of favour through the pandemic, weighed down by rising interest rates, subdued liquidity, and concerns that remote work would irreparably damage demand for space. Now, conditions are improving and sentiment is becoming more positive – and the proof is in the total return pudding. Below are five charts that highlight the recovery occurring in the office sector.

1. Asset prices appear to have bottomed

Office asset values across Australia fell -18% from late 2022 to the end of 2024. The devaluation cycle appears to have concluded, with appreciation of +1.2% recorded over the first half of 20251 . The downturn has created a compelling entry point for investors – office is currently providing a larger yield premium over the Australian 10-year Government Bond compared to the 30-year average.

The downturn has created a compelling entry point for investors – office is currently providing a larger yield premium over the Australian 10-year Government Bond compared to the 30-year average.

2. Investment performance is improving

Stable yields and ongoing income growth have contributed to an improvement in total return. Performance has been positive for the last two quarters, leading to the strongest rolling annual total return since early 2023.

3. Tenant demand now exceeds pre-pandemic levels

The income growth side of the ledger has been driven by strengthening tenant demand. Remote work did have a significant impact on occupied space in 2020, however demand has been increasing for nearly five years now. The recovery is even more impressive when split by asset quality – prime grade assets have recorded demand growth of +11% over the last five years, while demand for space in secondary assets contracted by -9%.

4. Rents are growing in most markets

Stronger tenant demand has flowed through to rents. Over the last five years, rents have increased in every major CBD market except Melbourne. Consequently, annual national CBD rent growth has been outpacing inflation since September 2024. Additionally, prime incentives are significantly higher than the long-term average in every major market, suggesting there is scope for them to fall if leasing conditions remain favourable. Decreasing incentives would provide a tailwind for income growth.

5. Future supply risk is lower than average

Construction is prohibitively expensive and new developments are very rarely “stacking up” in the current environment. With few projects breaking ground, the supply of CBD office space is expected to increase by only +0.3% p.a. to 2030, well below the long-term average annual rate of +1.1% and significantly lagging white collar jobs growth. A constrained supply pipeline should put downwards pressure on vacancy rates, supporting the sustainability of the recovery and the outlook for rent growth.

Heading in the right direction

While the turnaround of a real estate sector doesn’t happen overnight, multiple metrics show office is improving. For some, fear of catching a falling knife is turning into fear of missing out on the recovery upswing. With dual levers of stronger demand and weaker supply boding well for a tightening of vacancy and continued rent growth, office has every chance of topping the investment return table over the coming year.

 

 

  1. Cromwell analysis of MSCI data (Jun-25)

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Home Latest property industry research and insights
October 30, 2025

September 2025 quarter ASX A-REIT market update

Stuart Cartledge, Managing Director, Phoenix Portfolios

 

Market Commentary

The S&P/ASX 300 A-REIT Accumulation Index rose 4.8% over the September quarter, marginally underperforming the broader equity market, with the S&P ASX 300 Index returning 5.0%.

Most companies under coverage reported full financial year results to 30 June 2025 during the period. Broadly speaking results were solid. Headwinds of higher interest rates and subsequent asset devaluation appear to be a thing of the past, with forecast finance costs stabilising and valuations growing in line with rent growth. This is resulting in expectations of growth in funds from operations (FFO) and dividends per security moving forward.

The benchmark was dragged lower by Industrial heavyweight Goodman Group (GMG), giving up recent gains due to underwhelming forward guidance presented at its full year result. It closed the quarter 4.3% lower. Alternatively, the more conducive local market environment helped other property fund managers. Both Charter Hall Group (CHC) and Centuria Capital Group (CNI) reported that many of their investment channels are opening, most notably property syndicates sold to retail investors. CHC posted a solid result, with full year funds under management growth driven by capital expenditure and development activity. Moreover, forecast earnings per security growth of 10.6% exceeded expectations. CHC finished the quarter 18.6% higher. Similarly, CNI shook off concerns of a more challenging real estate cycle, with their largest property syndicate yet receiving strong demand. CNI also guided to earnings per security growth of 10%. The company’s share price jumped 31.2% higher in the September quarter.

Owners of shopping centres performed strongly over the period. After facing a more challenging backdrop, shopping centres are now operating in a supportive environment, with lower interest rates translating into consumer confidence and increased spending. Both Scentre Group (SCG) and Vicinity Centres (VCX) showed specialty sales growth that improved through every quarter of the financial year. Both also indicated strong outcomes continued into July and August. SCG gained 17.1%, while VCX rose 4.5%. Both now trade at a premium to net tangible asset backing, a scenario that seemed highly implausible not long ago. Similarly, owners of smaller neighbourhood shopping centres performed well, lifted by similar drivers. Region Group (RGN) added 8.6% and Charter Hall Retail REIT (CQR) finished the period 9.2% higher.

Office property owners mostly performed well in the quarter however performance was somewhat divergent amongst peers. It appears as if capitalisation rates have stabilised, face rents are growing slowly, and incentives have begun to decline. Despite this, most new office leases still require incentives of more than 40% of net rent to be paid, with demand highly varied, even within submarkets. Cromwell Property Group (CMW) led the way, up 36.0%, with a new large shareholder on the register. GPT Group (GPT) and Growthpoint Properties Australia (GOZ) both performed well, gaining 11.0% and 10.3% respectively. Dexus also outperformed the broader market adding 8.0%, in what was a reasonably tumultuous period for its funds management business. Mirvac Group (MGR) lagged the pack but still added 3.2% over the quarter.

Ongoing house price growth around the country supported residential property developers during the period. Perth-based developers performed particularly well, with Finbar Group (FRI) rising 25.7% and Peet Limited (PPC) up 20.6% as financial results and forward outlook for the companies remained strong. Stockland also rose sharply, gaining 14.2%, presenting a rosy outlook for ongoing growth. Aspen Group (APZ) also continued its move higher, benefitting from major index inclusion. It finished the quarter 18.5% higher.

Market outlook

The listed property sector is in good shape and provides investors with the opportunity to gain exposure to high quality, institutionally managed, commercial real estate, with projections of solid prospective growth. While share market volatility may be uncomfortable at times, the offset is liquidity, enabling investors to rebalance portfolios without the risk of being trapped in illiquid vehicles.

Property, both listed and unlisted, is a particularly interest rate sensitive sector. In recent years interest rates rose off generational lows, providing a headwind for real estate returns and valuations. The Reserve Bank of Australia has now reduced its Cash Rate Target three times since February 2025, providing a more supportive environment for real estate securities. The August reporting season reflected this, with companies under coverage providing solid updates, valuation growth and an expectation of liquidity returning to the property transaction market. Long term valuations are driven by “normalised” interest costs, meaning the impact of short-term hedges maturing is mostly immaterial.

The industrial sub-sector continues to show strong absorption of relatively high levels of supply, aided by the tailwinds of e-commerce growth, the potential onshoring of key manufacturing categories and the decision by many corporates to build some redundancy into supply chains to cope with current disruptions. All of these factors are contributing to ongoing demand for industrial space, albeit the previous period of market rents expanding rapidly appears to have dissipated. Vacancy rates remain near historic lows of around 2% in many markets. While rental growth has recently cooled, construction costs remain elevated, making additions to supply difficult and thereby prolonging conditions.

We remain cognisant of the structural changes occurring in the Retail sector with the growing penetration of online sales and the greater importance of experiential offering inside malls. Recent performance of shopping centre owners has however been strong, with consumers showing resilience and share prices moving higher, with some trading at meaningful premiums to net tangible asset backing. Importantly, we are also now seeing positive re-leasing spreads in shopping centres, indicating strengthening demand from retail tenants. These outcomes are no doubt aided by minimal vacancy across retail portfolios.

The jury is still out on exactly how tenants will use office space moving forward, but demand for good quality, well located space remains solid and there is growing momentum from companies to get staff back into the office. Leasing activity is beginning to pick up, and transactional activity is also returning, with discounts to book values materially reduced. Incentives on new leases remain elevated. At this stage demand for office space appears to be highly variable depending on location, even within submarkets.

We expect to see limited further downside to asset values in office markets but elsewhere expect market rent growth to drive valuations higher as capitalisation rates appear to have stabilised. Listed securities provides exposure to such growth.

The content above is taken from the Cromwell Phoenix Property Securities Fund quarterly report. Sign up here to be the first to access the latest report and to gain a deeper insight into the Fund’s performance.

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Home Latest property industry research and insights
October 29, 2025

September 2025 direct property market update

Economy

Political uncertainty in the US was a defining theme over the last quarter, and it came to a head on October 1st as funding lapsed and the Federal government shut down, fuelling uncertainty over fiscal discipline and delaying key economic data releases. The shutdown became the longest in history, ending on November 12th after 43 days of disruption. As expected, the episode had limited impact on Australia.

Back home, a number of data prints indicated inflation and growth are both running a touch hotter than expected. The September quarterly CPI increased to 3.2% on a 12-month basis1, rising above the upper bound of the RBA’s target band. While the result was skewed higher by some volatile items like fuel, and administered prices such as utilities and property rates, the breadth of categories running above 3.5% year-on-year suggests some inflationary pressures remain in the domestic economy.

While households’ financial position has been improving, rising cautiousness and a greater degree of saving (rather than spending) threatened to dampen Australia’s economic growth recovery. Those concerns were somewhat allayed by the latest print of the Westpac-Melbourne Institute Consumer Sentiment index which surged by +12.8% to 103.8, marking the first time it has sat in positive territory since early 20222.

Similarly, the unemployment rate fell from 4.5% to 4.3% in October, unwinding the increase seen in the previous month. The result was underpinned by the creation of 55,300 full-time jobs and an unchanged participation rate3. The RBA would have likely welcomed the outcome, which helps avoid the tension that would come with a deteriorating labour market at a time of sticky inflation.

Following the latest data releases, markets now believe the RBA’s easing cycle has concluded, with no further cuts priced in over the forecast horizon4. Economists largely agree, however some forecasters still expect a rate cut in the first half of 2026.

Taken together, economic data suggests Australia is on track and in a better position than most countries. The key question is whether the RBA will leave monetary policy settings in restrictive territory for too long, however the Board is cognisant of the risk and will be guided by the data.

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Office

The office sector’s gradual recovery continued, with net demand for space expanding by nearly 57,000 square metres (sqm) over the quarter. Sydney CBD again saw the biggest absolute increase in demand (36,000 sqm), while the 25,000 sqm of net absorption recorded in Brisbane CBD represented the strongest growth on a percentage basis. Sydney’s demand was led by prime stock and the Western Corridor, a precinct which struggled through the pandemic but is now attracting tenants centralising from other markets (particularly north of the bridge). Brisbane’s strong quarter was more broad-based, with occupied stock increasing across the quality spectrum. Occupied space contracted in Canberra, the worst performing market over the quarter, largely due to the consolidation of a federal government department.

Despite the positive demand result, the national CBD vacancy rate edged +0.1% higher to 15.1% due to weakening conditions in lower quality stock. Sydney was the only CBD market to record a decrease in vacancy rate, underpinned by the absence of development completions over the quarter. Four projects were brought to market in Melbourne CBD and pushed the vacancy rate up +0.4%, however it remains below the peak seen in December 2024. Adelaide saw the largest increase in vacancy as 50 Franklin St reached completion with space still unleased.

 

National CBD prime net face rent growth maintained its strong pace, increasing +1.2% over the quarter and +5.9% over the 12 months to September. Canberra recorded the strongest growth over the quarter despite its softening vacancy rate – there is significant variance in this market as tenants prioritise higher quality premises with strong ESG credentials in specific precincts. Growth in Brisbane CBD also continued at pace, reflecting favourable leasing conditions. Prime incentives increased slightly in Canberra, consistent with the shift to newly developed premises, but remained relatively unchanged across the other markets. The combination of solid face rent growth and stable incentives contributed to higher rents on an effective (incentive-adjusted) basis. This was the first quarter since June 2022 where net effective rents increased in all the major CBD markets.

 

Office transaction volume strengthened over the quarter to $1.3 billion, but this level remains below the long-term average. The biggest recovery was recorded in Melbourne, which was the top-performing market (by dollar volume) for the first time since September 2022. Similar to last quarter, a lack of large deals dampened the national volume figure. There was further evidence that the office valuation cycle is at, or close to, the bottom, with average prime yields unchanged in every CBD market.

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Retail

The ABS ceased publication of the Retail Trade series after the June release. While this reduces the granularity of retail data available, the Household Spending Indicator series still provides a solid read on consumer activity. Supportive conditions maintained the pace of spending growth over the quarter. Groceries continued to record stronger growth than discretionary categories, such as Clothing, while the mining states of Western Australia and Queensland continued to outperform New South Wales and Victoria.

 

Supply remains very constrained, particularly at the “big end of town”. There was no Regional shopping centre stock added for the fifth consecutive quarter, while a single Sub-Regional centre reached completion. Development of Neighbourhood centres is more pronounced, with annual stock growth running at 1.3% as at September. However, this is consistent with the delivery of new centres in population growth corridors and is still less than half the rate of growth averaged over the last 20 years.

This lack of supply is contributing to solid rent growth. On a net basis, Regional rents have grown 0.9% over the past year, outpacing Sub-Regionals and Neighbourhoods. Similar to office, Sydney and South-East Queensland recorded the strongest retail rent growth over the quarter.

It was another solid quarter of retail transaction activity with dollar volume totalling over $2.1 billion. The result was underpinned by Regional centres, as partial stakes in Bankstown Central and Westfield Chermside changed hands. Large Format activity was also elevated, headlined by the portfolio sale of six Bunnings assets by Wesfarmers. Neighbourhood centres saw slightly less activity than normal, while no Sub-Regional or CBD assets transacted. There was a moderate level of yield compression recorded over the quarter, led by Sydney which is typically the bellwether market for capital. Neighbourhoods tightened the most nationally, as investors continue to be attracted to convenience assets aligned to non-discretionary spending. Perth was the only market where yields were unchanged across every core shopping centre type.

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Industrial

Occupier take-up (gross demand) was largely in line with last quarter, totalling just over 823,000 sqm. Demand for this quarter was less dominated by a single tenant movement, with the largest leasing deal comprising just over 36,000 sqm of space. Transport & Warehousing was the main driver of the result with over 300,000 sqm of gross demand recorded, while a pickup in Manufacturing leasing helped offset weaker demand from Retail & Wholesale Trade. On a geographical basis, the result was largely consistent with last quarter – Sydney the most active market followed by Melbourne and Queensland.

Rent growth improved slightly on last quarter, averaging +0.8% nationally over the three months to September. Sydney was the top-performing market, with its Inner West precinct recording the strongest growth nationally (+3.5%) and the Outer Central West precinct also recording robust quarterly growth of +2.0%. Adelaide saw strong growth across its southern precincts and remains the top-performing market on an annual basis. Prime incentives increased in every Melbourne precinct, dragging effective rents lower, but were largely unchanged across the rest of the markets.

Delivery of new supply almost halved compared to last quarter, with less than 414,000 sqm of space brought to market nationally. This was the lowest quarter of supply since March 2023 and the most muted 3rd quarter since 2021, with limited completions in Brisbane and a lack of large projects the key drivers. Sydney and Melbourne accounted for 79% of supply over the quarter, a greater proportion than is typical. There is currently nearly 750,000 sqm of space under construction and due to complete in 2025, however, actual delivery may slip into subsequent periods given construction delays are persisting.

Industrial transaction volume strengthened further over the quarter, totalling nearly $3.5 billion across 102 deals. This was the highest number of deals conducted in a quarter since the data series commenced. Sydney and Brisbane were the standout markets, accounting for 60% of dollar transaction volume. The largest transaction of the quarter was Goodman’s acquisition of a 196-hectare site near the under-construction Western Sydney International Airport for around $575 million. While capital continues to prioritise Sydney, Perth was the market which saw the largest compression in yields (-25bps in every submarket). Brisbane also continues to be viewed favourably, with yields compressing in every submarket by 13-20 basis points.

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Outlook

Trade policy uncertainty remains a headwind for investor confidence. While the global economy is gradually adapting to the current tariff settings, lower courts have ruled the measures illegal. The Supreme Court is set to hear the case from 5th November, with a final ruling likely in early 2026. If the Court upholds the lower-court decisions, the Trump Administration is expected to explore alternative legal avenues to re-establish the tariffs. In practice, the near-term economic impact may be limited, but the ongoing legal and policy uncertainty is likely to keep risk sentiment cautious until the issue is resolved.

Australia is somewhat insulated from the impacts of global volatility, including the most recent tit-for-tat escalations between the US and China. The key considerations domestically are the trajectory of services inflation and the willingness of the RBA to step in and stimulate activity if the labour market deteriorates more quickly. The economy is beginning to transition from public-led growth to private sector investment, but a more supportive monetary environment may be required to maintain momentum.
The commercial property market continues to stabilise, with improving sentiment evident in both capital flows and leasing fundamentals. Construction remains prohibitively expensive in most circumstances, cramping development pipelines and supporting the outlook for existing assets. Office appears to have reached an inflection point, while retail and industrial pricing continues to firm. As confidence returns to the asset class and institutional capital re-engages, identifying compelling opportunities will increasingly depend on a deep understanding of asset quality and positioning.

 

Footnotes

  1.   Cromwell analysis of ABS data (Nov-25)

  2. Westpac-Melbourne Institute (Nov-25)

  3.   ABS (Nov-25)

  4.   ASX (Nov-25)

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Home Latest property industry research and insights
August 8, 2025

Strategic Asset Enhancement: Unlocking Long-Term Value at 400 George Street

 

Located in Brisbane’s prestigious North Quarter, 400 George Street is a 35-level commercial tower offering 43,978 square metre (sqm) of net lettable area across office, retail, and childcare. With an 89.8% occupancy rate supported by blue-chip corporate and government tenants, the building is a cornerstone of the precinct’s commercial landscape.

Now, with a lobby transformation underway, 400 George Street is entering a new phase of strategic enhancement—one designed to elevate its market positioning, continue to attract premium tenants, and unlock long-term value.

The refurbishment strategy

Scope of works:

400 George Street is undergoing a comprehensive redevelopment of its ground floor lobby, designed to modernise the space and elevate both its functionality and visual appeal. Key upgrades include a new street-facing entryway, an internal staircase and a new terrace, creating a more seamless and welcoming arrival experience.

The refurbishment will introduce flexible zones that support both informal and formal meetings, catering to the diverse needs of tenants. Additionally, a new 235 sqm food and beverage retail tenancy—featuring indoor and outdoor access—will be integrated into the lobby, enhancing social interaction and lifestyle convenience within the building.

Design vision

Led by renowned architects, Woods Bagot, in collaboration with Cromwell Property Group and Shape Australia, the lobby refurbishment is set to focus on creating a seamless, welcoming, and functional space. The vision is to emphasise connectivity, natural light and a premium finish. “The design concept is conceived as a landscaped garden portal which creates a unique urban subtropical experience that is enriched through the natural stone cladding, the generous landscape provision, and the integration of public art.”

The space is created with multi-purpose spaces for the modern working environment. “The flexibility of the modern working environment really questions the role that cities play, and the workplaces within them. So what we’re trying to do with the lobby is to create spaces for informal, formal, and serendipitous interaction”

 

Strategic value creation

Repositioning 400 George:

Rewinding the clock to 2009, to the time of construction, the North Quarter was an emerging precinct with limited amenities. A food court was installed on Level 1 to meet tenant needs, accessed via an escalator at the building’s entrance.

Today, the precinct is thriving, with abundant amenities and major occupiers like Suncorp, KPMG, Telstra, Microsoft and Santos. This evolution has enabled the transformation of the former level 1 food court into a purpose-built wellbeing and third-space. This upgraded area now includes a boardroom, training room, 200 sqm breakout/function space, multi-faith room, and 38 additional lockers—providing flexible environments for collaboration, learning, and reflection.

Complementing this is a class-leading end-of-trip facility, designed to support active commuting and wellness. Naturally lit and ventilated, the facility features 26 showers with Smart Fixtures, 530 lockers, 200 secure bike parking spaces, touchless entry, Dyson and GHD hair tools, a wellbeing room, and a dedicated yoga/workout space.

Together, these amenities are far better aligned with the expectations of the buildings occupants. They reflect a strong commitment to tenant wellbeing and sustainability both of which are increasingly recognised as key drivers of leasing decisions. As highlighted in JLL’s Tenant Perspectives 2024, organisations are prioritising high-quality, ESG-aligned workplaces that support employee experience, operational efficiency, and long-term business goals.

With key leasing milestones on the horizon in 2025 and 2026, the timing of the lobby refurbishment is strategic. It ensures the ground floor presentation matches the quality of amenity offered throughout the building and positions the asset competitively alongside Prime Grade offerings in the area. As part of the initial upgrade phase, the now-redundant escalator has been removed to create a more prominent and inviting street-level entryway—enhancing visibility, accessibility, and overall appeal.

Importantly, the refurbishment also plays a key role in repositioning 400 George Street as a premium commercial destination within Brisbane’s North Quarter. The upgrade aligns with broader precinct improvements, including the redevelopment of Roma Street Station, further enhancing the building’s connectivity, appeal, and long-term competitiveness.

Once complete, the lobby transformation will reinforce 400 George Street’s standing as one of the leading A-Grade assets in the precinct—delivering lasting value for tenants and investors alike.

Long-term benefits

Occupancy and rental growth

The lobby refurbishment is expected to play a key role in strengthening tenant retention by enhancing the overall experience and amenity offering. By delivering a premium arrival experience and modern, flexible spaces, the upgrade positions 400 George Street as a highly attractive option for tenants seeking quality and convenience in a CBD location.

JLL’s research shows that tenants are increasingly consolidating into prime-grade buildings to meet employee experience and sustainability goals. These improvements also create the opportunity for rental uplift, driven by enhanced presentation, upgraded facilities, and the introduction of prime retail space on the ground floor1.

 

ESG and sustainability alignment:

400 George Street’s strong sustainability credentials—including a 5.5-Star NABERS Energy rating, 4.5-Star NABERS Water rating, and a 5.0-Star Green Star As-Built rating—continue to make it an attractive option for government and blue-chip tenants seeking environmentally responsible workplaces.

The lobby refurbishment further reinforces Cromwell’s commitment to health-focused design and urban sustainability. By integrating natural materials, enhancing access to daylight, and creating spaces that support wellbeing and social connection, the upgrade contributes meaningfully to the building’s ESG performance and long-term environmental goals.

 

Conclusion

 

The lobby refurbishment at 400 George Street is more than a facelift—it’s a strategic investment in the future of Brisbane’s commercial landscape. With visionary design and premium amenities, the project is set to elevate the building’s status and deliver long-term value to tenants and investors alike.

 

1JLL. Tenant Perspectives 2024. Retrieved from jll-tenant-perspectives-2024.pdf

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August 8, 2025

Cromwell Unveils Landmark Project and Debt Refinance

Barton, ACT development

Cromwell Property Group (ASX:CMW) (Cromwell or The Group), announced on 11 July 2025 that it has entered into an agreement for lease with a Commonwealth Government entity to develop a 19,800 sqm office building in Barton, ACT. This project marks a significant milestone in Cromwell’s new strategic growth phase.

The six-level facility, designed to achieve a 6.0-star NABERS Energy and 6.0-star Greenstar rating, will be 100% occupied by a key Commonwealth Government department under a 15-year lease with an option for a 5-year extension, providing long-term income stability. The site is located in a premier location within the Parliamentary Precinct and enables the consolidation of multiple Commonwealth tenancies into a single building, close to important counterparts and Capital Hill.

Jonathan Callaghan, Cromwell CEO commented: “While broader market conditions have made new developments challenging, this project stands out as a compelling opportunity and is a strategic step forward after the completion of our business simplification process. The project will be led by Cromwell’s skilled inhouse Development team, ensuring the delivery of a top-of-the-line facility. With a long lease to the Australian Commonwealth Government, a AAA-rated, low risk tenant, this initiative is expected to drive strong returns.”

While the project will initially be funded by Cromwell, ultimately the outstanding quality of this project, and current lack of comparable opportunities, will make this asset very attractive to future capital partners as the Group transitions to a capital light investment management model.

The anticipated total cost of the development is $201 million. This includes land, construction costs, fees, finance costs, and a tenant incentive which is commensurate with market, to be taken in instalments during the delivery of the project. The projected yield on cost is expected to be greater than 6.3%.

Debt Refinance

Further positive steps forward since completion of the sale of the European platform include the renegotiation of our bilateral debt facilities, resulting in more favourable terms plus flexible covenants and longer duration. The renegotiation has resulted in a decrease in Cromwell’s weighted average drawn credit margin from 1.77% to 1.31%. Negotiation of this improvement in Cromwell’s debt terms was supported by the significantly reduced net debt and gearing position of the Group.

Gary Weiss, Cromwell Chair commented that “The journey to simplify Cromwell’s business has taken some time. We are pleased that the focus is now shifting to deployment of the Group’s strengthened balance sheet into careful and considered growth initiatives. Our business is ready and well equipped for the next stage of our journey”.

Market outlook

The listed property sector is in good shape and provides investors with the opportunity to gain exposure to high quality commercial real estate at a discount to independently assessed values. While share market volatility may be uncomfortable at times, the offset is liquidity, enabling investors to rebalance portfolios without the risk of being trapped in illiquid vehicles.

Rising interest rates have been a headwind for many asset classes, with property, both listed and unlisted, a particularly interest rate sensitive sector. In February, the Reserve Bank of Australia made its first cut to the cash rate target since November 2020, heralding a more buoyant environment for the property sector. The February reporting season also saw stocks providing solid updates, valuation stability and an expectation of liquidity returning to the property transaction market. Long term valuations are driven by “normalised” interest costs, meaning the impact of short term hedges maturing is mostly immaterial. A second 25bp interest rate cut was delivered in May 2025. Should current expectations for further interest rate cuts eventuate, the sector should perform well.

The industrial sub-sector continues to be the most sought after, given the tailwinds of e-commerce growth, the potential onshoring of key manufacturing categories and the decision by many corporates to build some redundancy into supply chains to cope with current disruptions. All of these factors are contributing to ongoing demand for industrial space, which has been evidenced by rapidly accelerating market rents and vacancy rates at historic lows of around 2% in many markets. While rental growth has recently cooled, construction costs remain elevated making additions to supply difficult and thereby prolonging robust conditions.

We remain cognisant of the structural changes occurring in the Retail sector with the growing penetration of online sales and the greater importance of experiential offering inside malls. Recent performance of shopping centre owners has however been strong, with consumers showing resilience and share prices moving higher. It is interesting to note the juxtaposition of very high retail sales figures despite very low levels of consumer confidence, no doubt impacted by rising costs of living. Importantly, we are also now seeing positive re-leasing spreads in shopping centres, indicating strengthening demand from retail tenants.

The jury is still out on exactly how tenants will use office space moving forward, but demand for good quality well located space remains solid and there is growing momentum from companies to get staff back into the office. Leasing activity is beginning to pick up, and transactional activity is also returning, with discounts to book values materially reduced. Incentives on new leases remain elevated.

We expect to see limited further downside to asset values in office markets but elsewhere expect market rent growth to largely offset cap rate expansion, particularly in industrial assets. Listed pricing provides a buffer to such movements.

The content above is taken from the Cromwell Phoenix Property Securities Fund quarterly report. Sign up here to be the first to access the latest report and to gain a deeper insight into the Fund’s performance.

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July 30, 2025

June 2025 quarter ASX A-REIT market update

Stuart Cartledge, Managing Director, Phoenix Portfolios

 

Market Commentary

The S&P/ASX 300 A-REIT Accumulation Index rose 13.4% over the June quarter outperforming the broader equity market, despite the S&P ASX 300 Index returning a creditable 9.5%. During the period, many of the global macroeconomic and geopolitical fears that were gripping the market somewhat dissipated, at least in terms of stock market returns.

The benchmark is dominated by Industrial heavyweight Goodman Group (GMG), which recovered strongly over the quarter, closing 21.0% higher, almost recovering to where it began 2025. The more conducive market environment also helped other property fund managers. Qualitas Limited (QAL), led the way, gaining 45.6%, despite limited company specific news. Solid residential house price growth is supportive of QAL’s business. Charter Hall Group (CHC) was also an outperformer, adding 20.1%. A more stable valuation environment and lowered macroeconomic concerns are a pleasant change for CHC’s business. Alternatively, HMC Capital Limited (HMC) was a meaningful underperformer, losing 18.1%, with ongoing issues across its healthcare property business, due to major tenant, Healthscope’s receivership process, along with a delayed settlement of a key asset that was to seed its Energy Transition business. The CEO of that business also departed HMC. It appears as if this will no longer be the growth driver for HMC, that was once anticipated.

Office property owners were underperformers in the quarter. Recently released external valuations saw limited movement for office properties, with the bulk of portfolios moving within a +/- 2% band. This was characterised by face rent growth offsetting a marginal expansion in capitalisation rates. Mixed rental data however tempered returns. Recent data showed the Melbourne CBD has had the strongest net absorption, but is facing the weakest effective rent growth, with a decline of more than 8% over the past 12 months. These stats were somewhat dominated by Coles planning a move of its head office from its current suburban location to an office building near Southern Cross Railway Station. Absorption numbers were less impressive in Sydney, however effective rents grew 10% over the year, driven by a reduction in incentives. Cromwell Property Group (CMW) lost 6.1% in the quarter, whilst Dexus (DXS) gave up 3.5%. Centuria Office REIT (COF) finished 2.2% higher and Perth-exposed GDI Property Group (GDI) rose 3.9%, still meaningfully underperforming the property index.

Shopping centre owners rose sharply in the June quarter, but still managed to underperform the index. Unibail-Rodamco-Westfield (URW) gained 12.4%, with a positive response to its investor day. Somewhat sadly for local investors, URW announced it would delist from the ASX. After a multigenerational run, this marks the end of offshore Westfield-branded shopping centres’ association with Australia. Locally, Vicinity Centres (VCX) moved 12.3% higher and domestic Westfield shopping centre owner Scentre Group (SCG) lifted 6.0%. Owners of smaller neighbourhood shopping centres also produced solid returns, with Region Group (RGN) up 9.7% and Charter Hall Retail REIT (CQR) adding 10.7%.

Uniformly positive house price growth around the country supported residential property developers during the period. Cedar Woods Properties Limited (CWP) jumped 36.6% higher, as it upgraded full year earnings guidance and restocked it land bank. Peet Limited (PPC) also outperformed, gaining 19.7%, supported by the announcement of a strategic review process. AV Jennings Limited (AVJ) rose 9.9% as it heads towards completion of its takeover. Finbar Group Limited (FRI) underperformed the index, up 0.7%, as its previously announced CEO transition occurred in June.

Market outlook

The listed property sector is in good shape and provides investors with the opportunity to gain exposure to high quality commercial real estate at a discount to independently assessed values. While share market volatility may be uncomfortable at times, the offset is liquidity, enabling investors to rebalance portfolios without the risk of being trapped in illiquid vehicles.

Rising interest rates have been a headwind for many asset classes, with property, both listed and unlisted, a particularly interest rate sensitive sector. In February, the Reserve Bank of Australia made its first cut to the cash rate target since November 2020, heralding a more buoyant environment for the property sector. The February reporting season also saw stocks providing solid updates, valuation stability and an expectation of liquidity returning to the property transaction market. Long term valuations are driven by “normalised” interest costs, meaning the impact of short term hedges maturing is mostly immaterial. A second 25bp interest rate cut was delivered in May 2025. Should current expectations for further interest rate cuts eventuate, the sector should perform well.

The industrial sub-sector continues to be the most sought after, given the tailwinds of e-commerce growth, the potential onshoring of key manufacturing categories and the decision by many corporates to build some redundancy into supply chains to cope with current disruptions. All of these factors are contributing to ongoing demand for industrial space, which has been evidenced by rapidly accelerating market rents and vacancy rates at historic lows of around 2% in many markets. While rental growth has recently cooled, construction costs remain elevated making additions to supply difficult and thereby prolonging robust conditions.

We remain cognisant of the structural changes occurring in the Retail sector with the growing penetration of online sales and the greater importance of experiential offering inside malls. Recent performance of shopping centre owners has however been strong, with consumers showing resilience and share prices moving higher. It is interesting to note the juxtaposition of very high retail sales figures despite very low levels of consumer confidence, no doubt impacted by rising costs of living. Importantly, we are also now seeing positive re-leasing spreads in shopping centres, indicating strengthening demand from retail tenants.

The jury is still out on exactly how tenants will use office space moving forward, but demand for good quality well located space remains solid and there is growing momentum from companies to get staff back into the office. Leasing activity is beginning to pick up, and transactional activity is also returning, with discounts to book values materially reduced. Incentives on new leases remain elevated.

We expect to see limited further downside to asset values in office markets but elsewhere expect market rent growth to largely offset cap rate expansion, particularly in industrial assets. Listed pricing provides a buffer to such movements.

The content above is taken from the Cromwell Phoenix Property Securities Fund quarterly report. Sign up here to be the first to access the latest report and to gain a deeper insight into the Fund’s performance.

Performance commentary

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July 24, 2025

June 2025 direct property market update

Economy1

The June quarter was notable for its geopolitical instability, headlined by Israel’s strikes on Iran and the subsequent involvement of the US. While Iran’s parliament voted to close the Strait of Hormuz and impede oil supplies in retaliation, the closure has not been enforced, and Brent Crude prices are only 4% higher than a month ago1 . Tensions have cooled to some degree and economic implications have been limited, however the situation could deteriorate and affect economic growth and/or inflation in the months and quarters ahead.

 

 

The other most newsworthy events, since our last market update, occurred after the completion of the June quarter – the RBA’s July rate decision and Trump’s ‘Liberation Day 2.0’. A cautious RBA elected to adopt a “wait and see” approach, going against market pricing and economists’ expectations to keep the cash rate steady at 3.85% in a split vote (6:3). The Monetary Policy Board wanted to see more evidence that inflation is likely to stay within the target band – namely June quarter CPI (released 30 July) and June employment data (17 July). These data points will be released prior to the next RBA decision in August and, absent a shock outcome, are expected to pave the way for the third cut of 2025. The market is now expecting 64bps of cuts over the remainder of the year2.

In its decision statement, the RBA flagged elevated global uncertainty and the unknown final scope of US tariffs and associated policy responses – on this front, there has been little respite. Reciprocal tariff rates were set to come into force on 8 July (US time) following a 90-day suspension, however the pause was extended until 1 August. Adding to the complexity, Trump proposed several new tariffs in early July including a 50% tariff on copper imports, 200% on pharmaceuticals from countries with “unfair” pricing mechanisms, and 50% on all imports from Brazil. These measures do not distinguish between ally or foe, and while the announcements may be negotiating bluster, the resulting uncertainty further diminishes confidence in the US as a stable and reliable investment destination. Fortunately, the RBA has plenty of capacity to stimulate the Australian economy if this global uncertainty leads to softer domestic growth.

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Fortunately, the RBA has plenty of capacity to stimulate the Australian economy if this global uncertainty leads to softer domestic growth.

 

Office

Analysis of JLL Research data indicates nearly 57,000 square metres (sqm) of positive net absorption was recorded across Australia’s major CBD markets in Q2 2025, marking the first quarter since 2021 where all markets saw demand for space grow. National CBD office demand has now been in positive territory for 11 of the past 12 quarters. Sydney CBD was comfortably the top performing market from a demand perspective, with 23,500 sqm of net absorption and 92,400 sqm over the last 12 months. Melbourne’s CBD benefitted from tenants centralising from Fringe markets, while the Brisbane CBD saw a number of large occupiers expand their footprint.

 

 

Despite the positive demand result, the national CBD vacancy rate edged 0.1% higher to 15.0% due to supply completions. Perth CBD saw the largest increase in total stock following Cbus/Brookfield’s completion of the premium development ‘Nine The Esplanade’. The rest of the increase in supply largely came from the Sydney CBD market, where a major refurbishment in Circular Quay and a luxury mixed use development were completed. While the vacancy rate increased in these two markets, the Brisbane and Adelaide CBDs both saw a tightening of 0.3% pts. In Canberra, the vacancy rate continues to vary significantly by precinct.

 

National CBD prime net face rent growth maintained its strong pace (+1.4%), taking annual growth to +6.0%. Brisbane recorded the strongest growth, reflecting the market’s low vacancy rate. Performance was also strong in the Melbourne CBD, where headline rents saw the biggest quarterly jump since 2019. Prime incentives were largely unchanged across all of the CBD markets, with Brisbane CBD (-0.3% pts) and Canberra (+0.3% pts) seeing the biggest movements. This resulted in effective rents – headline rents adjusted for incentives – growing most strongly in Brisbane and Melbourne.

 

 

Transaction volume fell to $0.9 billion for the quarter, representing the second-lowest June quarter result since the start of the data series (2007). The weak volume figure was due to a lack of major assets changing hands – the largest transaction this quarter was c$290 million, compared to more than $600 million last quarter. However, on a number of deals basis, this quarter saw more activity than last quarter. From a market perspective, Sydney CBD comprised the greatest share of national volume, while the Brisbane Fringe was the only market where volume exceeded the 10-year average.

There was further evidence that the office valuation cycle is at, or close to, the bottom. Average prime yields were unchanged in every CBD market except Brisbane, where a slight expansion of 6.5bps was recorded.

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Retail

Getting a read on the strength of the consumer has become more challenging over recent months, with Cyclone Alfred (March), and the unusual timing of the Easter/Anzac Day long weekends both introducing some noise in the data. Purchases of winter clothing supported growth in the most recent monthly data (May), however the pace of growth continues to lag expectations. With the RBA choosing to remain on hold, the drag of consumer pessimism may persist a while longer.

 

Positively for retail real estate, the biannual vacancy rate was largely unchanged over the last six months. Regional shopping centres saw vacancy decrease from 1.6% to 1.5%, while Neighbourhoods saw a significant decrease of 0.8% pts from December to June. These improvements were offset by a large increase in vacancy rate across the Sub-Regional centre type. From a market perspective, conditions tightened across every centre type in Sydney, while Melbourne was the main driver of higher Sub-Regional vacancy.

Supply remains muted with only 13,600 sqm of Neighbourhood space added to national core retail stock over the quarter. The limited supply pipeline is supporting retail fundamentals, however rents were largely unchanged over the latest quarter. On an annual basis, growth has been strongest in S.E. Queensland.

 

 

Retail transaction volume strengthened again over the quarter to total $2.4 billion. The resulted was buoyed by the Neighbourhood sub-sector which recorded its second biggest quarter of deal volume in history at just over $860 million. The elevated volume was skewed by the $450 million sale of St Ives Shopping Village, an unusually large transaction which included some adjoining residential properties and presents development potential. Large Format Retail continued to record elevated deal volume, with significant single tenant assets such as IKEA, Costco, and Bunnings, comprising the majority of this quarter’s activity.

Sub-Regional yields compressed across every market except S.E. Queensland. This centre type has seen the biggest recovery in yields since pandemic highs, and pricing is now approaching pre-COVID levels. Neighbourhood yields also decreased in Perth, while there was no movement across the Regional shopping centre type.

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Industrial

Occupier take-up (gross demand) was in line with last quarter at nearly 800,000 sqm. Transport & Warehousing was the main driver of the result with over 300,000 sqm of gross demand recorded. It was also a solid result across Retail & Wholesale Trade, with demand underpinned by Kmart’s preleasing of a new major distribution centre at Sydney’s Moorebank Intermodal Precinct. This leasing deal contributed to Sydney demand outpacing its five-year average and comprising nearly 40% of national take-up. Perth was the only other market to outperform recent history, with a number of occupiers expanding into larger premises.

Rent growth slowed significantly over the quarter with 16 of 22 markets staying unchanged compared to March. All precincts across Sydney and Perth were flat, while the South East was the only sub-market in Melbourne where rents grew (+0.6%). Adelaide also only had one precinct record growth, the Outer North, which was the top performer nationally (+3.3%). Adelaide has comfortably been the top performing market over the last 12 months, but it was Brisbane that topped the growth charts in June with average growth across its three precincts rising to 1.8%. There was a slight increase in prime incentives in select markets along the East Coast.

Just over 800,000 sqm of supply was completed over the quarter, around 30% more than the quarterly average of the past five years. While supply was below average in Melbourne and Perth, Adelaide saw its second largest quarter of development in history. There is currently nearly 950,000 sqm of space under construction and due to complete in 2025. Even if all of these projects are delivered on time, 2025 will see the lowest level of new supply since 2021. Additionally, actual delivery may slip into subsequent periods given construction delays are persisting.

Industrial transaction volume strengthened after last quarter’s unusually soft showing, totalling over $2.4 billion across 90 deals. Brisbane was a standout as Chinese e-commerce giant JD.com made its first industrial investment in Australia – the Wacol Logistics Hub – for around $250 million. Adelaide also saw elevated transaction activity with the dollar volume running 33% higher than the quarterly average of the past five years. Strong demand for Brisbane assets was reflected in market yields, which compressed by 12-20bps across its three precincts. Perth saw the largest movement in yields with every precinct compressing 25bps, while Sydney and Adelaide also recorded some instances of compression.

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Outlook

The global economy moved from alert to alarmed when higher-than-expected tariffs were announced in early April. While the ultimate trajectory of trade policy remains a key uncertainty, market anxiety has eased somewhat in recent months as Trump has signalled a readiness to back down if economic conditions deteriorate too sharply. Economists now expect the worst-case scenarios to be avoided, however growth is forecast to be weaker than if trade destabilisation had not occurred.

Australia is somewhat insulated from the impacts of global volatility. Most attention domestically is focused on the RBA and its willingness to stimulate the economy. Growth green shoots were seen in 2024, but momentum has slowed, particularly in consumer-oriented sectors. If a more supportive monetary policy environment is not delivered soon, the transition of the economy from public sector demand to private business investment may become bumpy.

The commercial property market continues to stabilise, with improving sentiment evident in both capital flows and leasing fundamentals. Office appears to have reached an inflection point, while retail and industrial pricing continues to firm. As confidence returns to the asset class and institutional capital re-engages, identifying compelling opportunities will increasingly depend on a deep understanding of asset quality and positioning.

How did the Cromwell Funds Management fare this quarter?

Cromwell Direct Property Fund (DPF, the Fund)

The entire DPF portfolio underwent a valuation in advance of the Fund’s Liquidity Event. Compared to prior valuations completed between June and October 2024, the six directly held assets fell by 0.60%. Two assets saw an uplift and one remained flat, primarily due to strong rental growth across Queensland markets.

Considering DPF’s partial ownership of Energex House in Brisbane (Cromwell Riverpark Trust), and the ATO building in Dandenong (Cromwell Property Trust 12), the total change was just 0.90%. Energex House remained flat, while the ATO building declined by 13%, attributed to a 1% increase in the capitalisation rate. This adjustment was made by the independent valuer based on comparable sales evidence in the Melbourne office market.

As at 30 June, DPF’s portfolio, now valued at $537.2 million on a look-through basis, is 96.6% occupied with a weighted average lease expiry of 3.4 years.

Most assets within the DPF portfolio are multi-tenanted buildings, with a significant concentration located in Brisbane. In the current market, particularly in Brisbane, we continue to observe strong effective rental growth. The portfolio’s shorter Weighted Average Lease Expiry (WALE) presents a strategic advantage, enabling the Fund to capitalise on rental reversion opportunities as leases expire and are renegotiated.

This staggered lease expiry profile allows space to be progressively repriced to current market rates, supporting earnings growth. Additionally, the shorter WALE provides flexibility to reposition assets and attract higher-paying tenants, further enhancing the portfolio’s income potential and long-term value.

Just under half of the gross passing income is derived from Government and Listed companies or their subsidiaries. Cromwell’s asset management team have negotiated over 10,000sqm of leasing this financial year across 23 transactions, with several larger deals currently in advanced stages of negotiation. The largest completed deals occurred at 545 Queen Street in Brisbane, including a 6-year lease on over 2,100sqm to a new tenant, and a 2-year lease extension on 1,600sqm to an existing Federal Government tenant.

Cromwell Property Trust 12 (C12)

Cromwell Property Trust 12 is nearing the end of its second term in October this year. In September, investors in C12 will receive a Notice of Meeting and Explanatory Memorandum, which will propose an extension of the Fund’s term through to December 2027. The Explanatory Memorandum will contain market data and commentary to help investors decide whether they wish to extend the trust term or take the asset to market. The ATO building remains 99.3% leased, with only minor ground floor vacancy and a WALE of 5.1 years. Since its inception in 2012 with an initial portfolio of three assets, C12 has delivered strong performance. Despite recent valuation adjustments, the Fund has achieved an equity internal rate of return (IRR) of approximately 11.7%, reflecting its long-term success.

Footnotes

  1. Cromwell analysis of MarketWatch data (9 July)
  2. ASX (8 July)
About Cromwell Direct Property Fund

Read more about Cromwell Direct Property Fund, including where to locate the product disclosure statement (PDS) and target market determination (TMD). Investors should consider the PDS and TMD in deciding whether to acquire, or to continue to hold units in the Fund.

LEARN MORE

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Home Latest property industry research and insights
May 14, 2025

An inside look: Transforming office spaces

 

We often showcase the impressive results of office fitouts conducted by Cromwell within our assets, which help secure rental income by driving tenant retention and attracting new tenants. But what does the fitout process actually involve? Cromwell combines a unique blend of tenant focus and expertise, backed by a strong track record of managing and delivering complex refurbishments and integrated tenant fitouts. We collaborate with multiple stakeholders to ensure projects are completed on time, within budget, and to the highest specifications.

In this edition, we sit down with the architects from Gray Puksand, along with our dedicated Development and Leasing teams, to delve into the processes behind the Cromwell office fitout. Cromwell occupies two floors in the Cromwell Direct Property Fund’s 100 Creek Street asset in Brisbane.

What were the initial steps involved in a fitout project?

Brendan Sim, Cromwell Development Manager: We begin our fitout projects by thoroughly understanding the tenant or prospective tenants’ requirements through a series of meetings and workshops. In this case, the tenant, Cromwell wanted a post-COVID workspace that was comfortable, inclusive, functional and timeless to minimise need for future refurbishment. Key requirements included fostering in-office collaboration, creating areas for different types of work, ensuring accessibility and incorporating sustainable practices. Flexibility for future growth and reconfiguration was also essential.

With these requirements in hand, we created a comprehensive project brief and conducted a competitive design and construct tender process, ensuring that the selected contractor had the expertise to meet both budgetary and sustainability goals. Gray Puksand was chosen as the architect. From there, we collaborated closely with both contractors to refine the design, ensuring it met all the tenants needs and goals. This collaborative approach is crucial to efficiently addressing challenges and ensuring a fitout project’s success.

Since 2010, Cromwell has applied the Soft Landings Framework to ensure long-term performance and tenant-focused outcomes. This framework involves engaging stakeholders to critically appraise design and construction, delivering solutions that meet user needs and provide support through all phases of use. Key consultants, contractors, and suppliers commit to an aftercare plan beyond project completion, ensuring ongoing responsibility and interest in the project’s success.

 

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How did you integrate a new way of working into the design?

Maria Correia, Gray Puksand: In answer to the brief, we introduced the “Cromwell Lifestyle” concept. This concept embodies a curated experience that connects people, spaces, and technology, promoting community, wellbeing, and learning. Central to our approach was a deep understanding of Cromwell’s post-COVID needs and values.

The inclusion of native plants, natural light, and a light colour palette created a sense of place that felt authentically Queensland. We addressed diverse user needs by incorporating varied settings, such as collaborative zones, focus rooms, a sunroom, a library, wellness rooms, and a multifaith room. This allows staff to find spaces that suit their work styles, enhancing productivity and comfort.

The emotional aspect of our design drew inspiration from residential and hospitality spaces, creating environments that felt special and encouraged staff to engage. By blending functional and emotional elements, we crafted a workspace that not only met but exceeded the brief, fostering a strong sense of belonging and culture among staff.

By blending functional and emotional elements, we crafted a workspace that not only met but exceeded the brief, fostering a strong sense of belonging and culture among staff.

 

What were the key challenges and successes of the project?

Brendan Sim, Cromwell Development Manager: We are proud of our track record of delivering projects on time, to scope and to budget. Despite having four separate contractors working simultaneously within the building, we delivered the project under budget and handed it over early.

Cromwell is a strong believer in integrating ESG principles into every aspect of our operations. With this project, we aimed to create a pinnacle example of what we can achieve on behalf of tenants and are proud to have met an extensive list of goals.

We prioritised reuse and refurbishment wherever possible to reduce fitout costs, waste and embodied carbon, recycling 92 workstations and 132 desk chairs from our existing fitout and purchasing second-hand desks and chairs from marketplace for focus rooms. The existing intertenancy staircase was refurbished and reclad. We achieved a 96% waste diversion from landfill, including the removal of the existing fitout to make way for the Cromwell fitout and ensured a fully electric site with no use of fossil fuels.

We understand that ESG encompasses more than just environmental impacts. We achieved a 50:50 gender diversity across the project delivery team and 3.75% First Nations procurement based on contract value. Furthermore, 84% of the work was completed within 7 am – 5 pm, Monday to Friday, which is more socially sustainable for people working on-site.

Maria Correia, Gray Puksand: Sustainability was a cornerstone of the project. We used climate-positive materials and implemented energy-efficient LED lighting with sensors. Cradle-to-cradle certified carpets and refurbished workstations extend the workspace’s lifecycle, contributing to a regenerative circular economy. Our approach ensures durability, easy repair, and repurposing, reducing costs and waste.

How do you optimise a fitout design?

Brendan Sim, Cromwell Development Manager:  When creating a fitout, we focus on using the space effectively. This is obviously important to a tenant so that they can get the most out of a space. For example, in the Cromwell fitout we transformed what would be a “dead” space – the back of house corridor – into a functional locker and storage area. We placed all meeting rooms and focus rooms at the buildings core, while positioning office desks, where staff would spend most of their time, around the perimeter of the space to ensure ample natural light throughout the day. Modularity throughout the fit-out design was a clear focus. This will allow meeting rooms or break out spaces to be amended efficiently to accommodate workstations pods or other break out spaces as the requirements of the business evolve over time, giving Cromwell the ability to grow within the current floorplate.

Maria Correia, Gray Puksand: As we move to the AI workplace and the uncertainty of what that will bring, prioritising the ‘human’ component of the workplace will be critical. The design acknowledges the diverse needs of the workforce, recognising that individuals have varying working styles and preferences.  The workplace settings at Cromwell are thoughtfully designed to encourage collaboration and inclusivity, providing spaces for socialising and connecting. Additionally, areas like the library, sunroom, wellness room, multifaith room, and focus rooms cater to individual needs, offering retreats for focus and relaxation.

What are the current trends and cultural shifts in the office landscape, and how are these influencing your designs?

Maria Correia, Gray Puksand: Cultural shifts in workspace design have evolved significantly over the past few decades, driven by changes in work practices, technology, employee preferences, and broader societal trends. There are several trends emerging some of which we have integrated into the Cromwell workspace however with the rise of the AI workplace, I think moving forward it would be good to focus on the ‘human centric’ workplace trends outlined below.

Health and Wellness Focus

With the rise of workers health and wellbeing due to the stresses of work and the sedentary nature of desk work more and more business are embracing designs that prioritise employee health and wellness, including features like ergonomic furniture, biophilic design (integrating nature into the workspace), natural light, and spaces for relaxation. We integrated this design trend throughout the Cromwell workspace.

Employee-Centred Design

Employee feedback is increasingly being sought to shape workspace design. Cromwell undertook an extensive amount of consultation with their users to arrive at the brief. We then conducted some informal group interviews to further understand user’s needs. This “user-centric” approach allowed us to all consider the preferences, needs, and behaviours of employees, fostering a sense of ownership and satisfaction. This collaborative design process informed our design approach to create open spaces for group gatherings e.g. breakout / town hall and quieter more intimate social spaces e.g. library.

Work-Life Integration

Work-life balance was often viewed as a separate concept from work, with offices being places where work and personal life were strictly separate. Modern workspace designs are focused on work-life integration, offering amenities that make the office a more comfortable and accommodating place to work, such as wellness rooms, daycare facilities, or even spaces for socialising. Our Concept of ‘The Cromwell Lifestyle’ begins to bring to life this Work-life integration to help users balance personal and professional responsibilities, leading to higher job satisfaction and engagement.

How does the fitout help with leasing activity at 100 Creek?

Stephen Rutter, Cromwell National Manager Project Leasing: We tailor our leasing strategy to each building by listening to tenants, staying attuned to market trends, and developing spaces accordingly. At 100 Creek Street, our approach includes a mix of cold shells, warm shells, and speculative fitouts when marketing spaces for lease.

  • Cold Shell: A blank canvas that allows tenants to customise the space to their specific needs.
  • Warm Shell: Provides a head start with some basic infrastructure in place.
  • Speculative Fitout: A plug-and-play solution, ideal for tenants without a dedicated team to manage a new fit-out, making it easier for them to move into a new tenancy.

The fit-out has significantly enhanced the appeal of 100 Creek Street. We walk prospective tenants through the space to showcase the building’s flexibility and the high-quality office fit-outs that can be achieved.

The fit-out serves as an excellent example for prospective tenants interested in cold shell spaces, demonstrating the transformation from a blank canvas to fully functional offices that meet modern working demands. This project has set a new benchmark for office spaces in the area. Combined with the Business Hub, an important facility for tenants—particularly small-to-medium tenants—who wish to use boardroom or training facilities but don’t have access to these as part of their own tenancy, and the local amenities, it makes 100 Creek Street a highly desirable location.

As of March 30, 2025, 100 Creek Street boasts a 94.2% occupancy rate.

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